Evaluating financial stress and performance of beginning farmers during the agricultural downturn

Evaluating financial stress and performance of beginning farmers during the agricultural downturn PurposeThe purpose of this paper is to examine the financial performance and stress of beginning farmers in the USA with emphasis on the agricultural downturn experienced since 2013.Design/methodology/approachUsing the US Department of Agriculture’s Agricultural Resource Management Survey (ARMS) data, probit models are estimated to study the personal and farm characteristics that affect whether or not the financial ratios fall into critical zones as defined by the Farm Financial Standards Council. The financial ratios involve liquidity, solvency, profitability, efficiency, and repayment capacity.FindingsBeginning farmers are at a greater risk of financial stress on average, with higher likelihood of financial stress in liquidity and efficiency. Further, the recent agricultural downturn has negatively affected liquidity, solvency, and profitability for farmers while repayment capacity does not appear to be affected. During the downturn, beginning farmers are better positioned than the general farming population with respect to liquidity and repayment capacity.Originality/valueThis paper applies current lending practices to a nationally representative sample of farms over a time of changing economic conditions for the agricultural sector. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Evaluating financial stress and performance of beginning farmers during the agricultural downturn

Agricultural Finance Review, Volume 78 (4): 13 – Aug 6, 2018

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0002-1466
DOI
10.1108/AFR-08-2017-0074
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to examine the financial performance and stress of beginning farmers in the USA with emphasis on the agricultural downturn experienced since 2013.Design/methodology/approachUsing the US Department of Agriculture’s Agricultural Resource Management Survey (ARMS) data, probit models are estimated to study the personal and farm characteristics that affect whether or not the financial ratios fall into critical zones as defined by the Farm Financial Standards Council. The financial ratios involve liquidity, solvency, profitability, efficiency, and repayment capacity.FindingsBeginning farmers are at a greater risk of financial stress on average, with higher likelihood of financial stress in liquidity and efficiency. Further, the recent agricultural downturn has negatively affected liquidity, solvency, and profitability for farmers while repayment capacity does not appear to be affected. During the downturn, beginning farmers are better positioned than the general farming population with respect to liquidity and repayment capacity.Originality/valueThis paper applies current lending practices to a nationally representative sample of farms over a time of changing economic conditions for the agricultural sector.

Journal

Agricultural Finance ReviewEmerald Publishing

Published: Aug 6, 2018

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